Debt limitation act: Govt, PPP agree to amend law redefining public debt

Senate to pass FRDL Amendment Bill as a separate law today

ISLAMABAD: The government and Pakistan Peoples Party have reached an understanding over the issue of bringing amendments in the Fiscal Responsibility and Debt Limitation (FRDL) Act of 2005 and agreed to introduce a new bill in the Senate.

The understanding between the two mainstream political parties was reached after the opposition termed the government’s move of amending the FRDL Act through Finance Bill 2016 ‘unconstitutional’.

The government has agreed to remove relevant clauses on FRDL amendment from the Finance Bill on the condition that the Senate will pass the FRDL Amendment Bill 2016 as a separate law today (Friday), confirmed Senator Saleem Mandviwalla of the PPP. Mandviwalla is the chairman of the Senate Standing Committee on Finance and met with Finance Minister Ishaq Dar on Tuesday evening to discuss the matter.



The government was adamant to amend the bill either as part of the Finance Bill or a separate law due to a commitment to the International Monetary Fund.

According to the understanding reached with the PPP, the government on Friday (today) will move the FRDL Bill in the Senate with a request that the upper house should pass it the same day without referring it to its Standing Committee on Finance for a review.



The normal procedure is that after introduction in National Assembly or Senate, a bill is referred to the respective standing committee that has a right to either accept the proposed piece of legislation or reject it.

Last week, the Senate Standing Committee on Finance while going through the proposed budget 2016-17, had taken an exception to the government’s move to amend the FRDL Act of 2005 through the Finance Bill 2016. In case of Finance Bill, the Senate does not have the voting powers, therefore, every successive government tried to use this avenue to amend controversial laws.

Both the houses of parliament had passed the FRDL Act in 2005 and this can only be amended by National Assembly and the Senate separately. Finance Minister Ishaq Dar also confirmed that an understanding over the FRDL Act amendment has been reached.

“I am sure they will honour the understanding and I will honour my commitment,” said the finance minister while talking to The Express Tribune.

Mandviwalla said that it was victory for the Senate that the government accepted to exclude the FRDL Act amendments from the proposed Finance Bill.

However, Pakistan Tehreek-e-Insaf Senator Mohsin Aziz said that his party was not part of any understanding. Senator Aziz, who is also member of the finance standing committee, said that he would not support the proposed change in the public debt definition.



The government has proposed sweeping changes in the FRDL Act – among the most significant is change in the definition of total public debt. The government is going to change all those sections of the law that capture the exact quantum of the public debt and their reporting to parliament.

During past three years, the PML-N government has been subject to severe criticism for contracting expensive foreign debt and increasing the debt pile. It has proposed, “Total public debt means the debt of the government serviced out of the Consolidated Fund and debts owed to the International Monetary Fund”. The current statutory definition is “total public debt means a sum of total outstanding borrowings”.

Under the existing law, the public debt should be not more than 60% of GDP, although it is currently about 65% of GDP. However, the government has now proposed to amend this clause as well and sought to reduce the public debt to 60% of GDP by end of June 2019.

Published in The Express Tribune, June 17^th, 2016.